Sunday, December 20, 2009

On December 5th, I bookmarked Jim Grant's Op Ed for the Wall Street Journal entitled Requiem for the Dollar. I had meant to blog about it, but got busy, and it actually worked out for the best, as we now have 15 days of trading hindsight since the op ed was published.

I should first do the obligatory expression about how I think the world of Jim Grant (I actually do). He's a great investment mind, and a truly eloquent writer. But this is a good lesson on why you should always read the financial news with a skeptical eye, no matter how convincing the argument for one scenario or another will be.

As you can tell by the title of Grant's piece, he's not enthralled with the buck's prospects, and kicks off the article with some ominous lyrics:

After a glorious run,

Has the greenback become

The General Motors of currencies,

Hobbled by bad management?

I personally agree with all of the points Grant makes...save for perhaps the timing of his call.

Ironically, while Grant and fellow WSJ readers were mourning the passing of the dollar, the buck itself was kicking off a megarally:

Somebody forgot to read Grant's article to the US dollar.

(Source: Barchart.com)

Of course, no market goes up or down in a straight line. But perhaps, for the time being, the dollar may already have all the "bad news" priced in.

Another great example of why it's so dangerous to use the news to trade - the news usually lags the price action!

Please exercise caution when reading this piece, as any free market loving individual may throw up all over himself or herself!

Robert Prechter: Run, Do Not Walk, From Munis

Bob Prechter's latest Elliott Wave Theorist popped into my Inbox Friday afternoon. It's excellent as always, and the good folks at EWI were kind enough to allow us to reprint a portion of Bob's analysis, which you can read here.

Hat tip to The Daily Crux for the tip on this interview. And enjoy the hilarious Tiger Woods quip!

Positions Update - Holding S&P Puts, Waiting for Long Dollar Re-Entry

On Thursday, I took advantage of the market dip to close out both S&P shorts. They had to be closed out or rolled anyway. Both positions were closed at a loss, but I was fortunate to get a down day to sell on.

Still looking for a re-entry point into the dollar trade, which I basically got "margined" out of. I would have preferred to hold the position, rather than time the exit and re-entry, as I believe the trend has now changed (finally).

And I'm still holding the S&P 1050 puts, which continue to shed value. But, I think the risk/reward of holding them here is quite favorable still.

Another strong week for the dollar!

(Source: Barchart.com)

The S&P continues to defy gravity - but its time may be limited, if the dollar has indeed put a bottom in.

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